1.1 Introduction
Financial institutions are referred to as a company that deals in all types of finance-related businesses. They are different from banks and play a very important part in broadening the financial services in the country. They provide a very attractive rate of returns to the customers in comparison to any government-centric banks. It deals in loans and advances and also specializes in some specified sectors like hire purchases and leasing (Educba, 2021). The financial institution deals with finance-related services. These are gaining popularity day by day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It also provides specialized services like hire purchase and leasing. The simple and organized procedure of the institutions is becoming very complementary.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
Financial institutions occupy a vital position and play a lendable role in the economy of the nation. Their major purposes are proper mobilization of find as well as provision of capital for industrial development, which is aimed at enhancing economic growth and development.
In the early year of banking operation in Nigeria, banks performed their intermediary function by giving loan mainly on individual basis (i.e separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sums of money which is provided by bank on medium or long term basis.
However, banking is a highly regulated industry the world over with restrictive monetary and credit guideline in loan growth and reserve requirement, sectoral allocation to priority sector of the economy, and excess liquidity mop-up through the assurance of stabiclation securities to the bank to mention a few due to these restrictions, it is difficult for a bank to meet up with the huge loan demanded of their customers. Also, it is well known that lending is not risk free, and that bank prefer to spreads their risk with others in the banking industry.
Loan syndication is now being practiced in Nigeria starting from the 1960’s when a consortium of commercial banks and acceptance houses discounted trade bills for marketing boards under the produced bill finance scheme. Formalized loan syndication came into being during the oil boom of the 70s when there was need for adequate capital of finance the industrialization programmes. During this period, few merchant bank had been incorporated.
Loan syndication has assumed international dimension because of the need to provide adequate capital to finance the fast growing world economy. An international syndicated credit is manage and underwritten by one or more finance. Institution normally from a location other than the domicile of the borrower, lenders from different countries could provide the borrower with access from their countries or to move its own currency from other contracts of domicile.
Against this background, banks come together forming what is known as “Consortium” to advance finds is called loan syndication and is sometimes called “Cosortun”. Lending it can also be define as the agreement between two or more lending institution to provide a borrower with credit facility utilizing common loan documentation.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Financial Institution and Its Role to the Development of the Maritime Industry in Nigeria.
1.3 Statement of Problems
Investigation reveals the following problems of the financial institution and its role to the development of the maritime industry in Nigeria (A Case Study Of Maritime Joint Stock Bank) research work;
- To investigate why Loan syndication is not properly managed given priority attention by monetary authorities. Despite it’s strategic place in financing viable projects, capable of injecting foreign currency, creating employment, and facilitating rapid economic development.
- To examine critically the place of financial institutions in the management of Loan syndication in the economy, loan syndication is a child of circumstances arising from legal lending restrictions, risk sharing and liquidity problems. The researcher would like to know despite the constraint prevailing is it still a supplementary option for business financing.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Financial Institution and Its Role to the Development of the Maritime Industry in Nigeria using Maritime Joint Stock Bank as a case study. In achieving this aim, the following specific objectives were laid out as follows:
- To identify those fundamental problems confronting Loan syndication and suggest how much problems can be solve.
- To ascertain the effect of Loan syndication in the economic development.
- To highlight the potential s of Loan syndication in the economy
- To recommend that syndicated loan is not deferent from other loan. Rather it is subject to conditionalities, attracts higher interest rate, subject to default, and time lapses in packaging as a result of bureaucracy involved by consortium banks.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Are there any fundamental problems confronting Loan syndication and suggest how much problems can be solved?
- Is there any effect of Loan syndication in the economic development?
- Is there any the potential of loan syndication in the economy?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between loan syndication and potential of loan syndication in the economy.
- H1: There is a significant relationship between loan syndication and potential of loan syndication in the economy.
Hypothesis Two
- H0: There are no fundamental problems confronting Loan syndication.
- H1: There are fundamental problems confronting Loan syndication.
1.7 Significance of Study
This study is expected to provide useful information on Loan syndication to the following. The students by the use of this project make researchers and source information on the rule of financial institution in the management of Loan syndication.
Financial institution via this project will learn how to keep to their Loan syndication agreements, it will also encourage the financial institutions to give financial accommodation through Loan syndication because it is more beneficial to them financial institution will also learn how to reduce the time frame in packaging a syndicated loan.
The borrower, with the aid of this project will know the appropriate procedures involved in obtaining loan through syndication. Since Loan syndication contributes immensely to the development of our economy both the government and the targeted audience will benefit from the project. The government with the help of this project knows more about the benefit of Loan syndication in our economy.
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of Study
The scope of the research is focused on Financial Institution and Its Role to the Development of the Maritime Industry in Nigeria using Maritime Joint Stock Bank as a case study.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Financial Institution: It is an establishment that completes and facilitates monetary transactions, such as loans, mortgages, and deposits.
